1. Treatment of Geophysical Data as a result of M&A,
CCAA or Bankruptcy
November 30, 2016
Presented by: George Fairs of Divestco Inc.

2. You are in a “Process” Now What?
Types of Processes
Sale of Company (Outright Sale or Merger) “Change of Control”
Sale of Company with a “Spin-Out”
Sale of Assets
Farm-Out
CCAA
Receivership/Bankruptcy

3. Type of Data Determines how it is affected in the “process”
Data Types
Type of Data Determines how it is affected in the “process”
Types of Data
Proprietary 100%
Proprietary Partner - Operated
Proprietary Partner - Non Operated
“Trade” or Licensed Data
Undocumented Data

4. Data Types
For the purpose of the Process you are in what is seismic data being deemed to be?
An asset which can be bought and sold
A liability
Property
Intellectual Property
Confidential Information subject to copyright law
Trade secret / competitive asset
A hybrid of the above
For the purpose of the Process you are in what is seismic data being used for?
Reserve estimates; Canadian Oil and Gas Evaluation Handbook (COGEH) SPEE
Data rooms for M&A processes
Revenue generation; licensing
Leverage in negotiations
Derivative products of seismic data must also be treated as seismic data and are subject to the same terms, conditions, restrictions and privileges as the seismic data they are derived from

5. Outright Sale of Company
Process Types
Outright Sale of Company
Proprietary 100% - Data is freely transferrable
Partner Operated – Their data/interest is transferrable (assuming no other copies)
Proprietary Non Operated – data/interest is transferrable
“Trade” or Licensed Data – Data licenses are transferrable but may have “Transfer Fee” or be subject to specific data contracts
Undocumented Data – Without clear lineage data should be destroyed
Contracts are King – All transactions are subject to agreed upon documentation
APEGA Practice Standards “Guideline for Ethical Use of Geophysical Data” May 2010 dictates that in all instances data contracts are the determining factor in deciding how data is to be addressed. “What is not expressly permitted is prohibited”

6. Outright Sale with a “Spin-Out”
Process Types
Outright Sale with a “Spin-Out”
Proprietary 100% - Data is free to assign licenses/ownership or divide interest
Proprietary Operated – The interest must be assigned to one of the entities (assuming no other copies remain)
Proprietary Non Operated – Interest must be assigned
“Trade” or Licensed Data – Data licenses are not transferrable
Undocumented Data – Without clear lineage data should be destroyed

7. Process Types Sale of Assets
Proprietary 100% - Data or License can be transferred
Partner Operated – Their data/interest can transferred but partner must be compensated (assuming no other copies)
Proprietary Non Operated – same as above
“Trade” or Licensed Data – No Data licenses are transferrable
Undocumented Data – Without clear lineage data should be destroyed
CAt no time does licensed data accompany a transfer of assets unless approval is granted by all data owners

8. Process Types
Farm Out
Proprietary 100% - Data or License can be transferred
Partner Operated – Data license can be granted but requires partner approval and partner must be compensated.
Proprietary Non Operated – Approvals must be granted and all partners must be compensated
“Trade” or Licensed Data – No Data licenses can be granted
Non Documented Data – Without clear lineage data should be destroyed .

9. During this period all rights are protected.
Process Types
CCAA
Definition: CCAA is a remedy available whereby companies are granted a “Stay” and given the opportunity to restructure their affairs through a “Plan of Arrangement” in the hopes of avoiding receivership and bankruptcy
In practice it means that a company’s debts are put on hold for a period of time so that the company can attempt to restructure the entity/debts/obligations and continue on.
During this period all rights are protected.

10. Bankruptcy and Insolvency Act but to date this has not been litigated.
Process Types
CCAA
If the company held valid data licenses before, their data licenses are protected during this process *
“Business as usual” data can be used in any way to further the restructuring process.
*Disputes can arise where contract law and property rights clash with the
Bankruptcy and Insolvency Act but to date this has not been litigated.

11. Process Types Receivership/Bankruptcy
Definition: A remedy available to secured creditors to recover amounts outstanding in the event a company defaults on loan obligations
In practice it means that a company can no longer pay its bills and the creditors have the right to sell assets in order to recover monies owed.
During this period data may become an asset and subject to sale

12. Receivership/Bankruptcy
Data Types
Receivership/Bankruptcy
Proprietary 100% - May be given/sold by the court appointed receiver
Proprietary Partner Operated – Their interest can be sold*
Proprietary Non Operated – Their interest can be sold*
“Trade” or Licensed Data – Can not be transferred unless approved by data owner and new licenses are created
Non Documented Data – must be destroyed
*Assumes only one copy of data is transferred

13. If You Go into a Process What Do You Do?
Step 1 – Protect the Data
Data is a valuable assets and is often misunderstood, given away or destroyed. Don’t assume the bank, receiver or trustee is familiar with seismic data
Step 2 – Read the Contracts
Review license agreements, JOA’s, JV Agreements, Unitization Agreements
Step 3 – Protect the Partners
If there are partners on the data their interests must be taken into account
Step 4 – Acquire Approvals
Get the approval of the data owner before putting data into a data room, transferring licenses or selling the assets

14. Pitfalls –What to watch out for!
Common pitfalls
Transferring Licensed data in a partial / asset sale
Transferring Joint Proprietary Data in the form of a license without partner approval
Transferring Licensed data, especially that subject to a transfer fee without understanding if prohibitions exist within the contract
In the case of multiple transactions transferring data in the “wrong order”
Due to lack of knowledge of the classes of seismic data potential revenue is often lost and problems are caused in the receivership process
Transferring proprietary rights when a license would suffice for a sale of an asset(s); specific to 100% proprietary seismic
Transferring all data when only some would be required; seismic data not essential to an asset sale could be licensed until sold as a separate asset
Refusing to license data owned by a company in receivership

15. Thank You Any Questions?